If you are in the process of forming a limited liability company (LLC), crafting an operating agreement is one of the most important steps you can take. An operating agreement sets out the rights and responsibilities of all members of the LLC. These terms will determine everything from how profits are split to whether new members can join.
Even if you believe you and your partners are on the same page, it is always beneficial to have a legally binding contract in place. When drafting such a document for your new company, the assistance of an experienced business formation attorney can be invaluable. Our Alpharetta operating agreements lawyers can help you form a contract that works best for you and your partners.
All operating agreements are different, and the specific terms of your contract will depend on the nature of your business and your members’ goals. Most provisions in a typical operating agreement cover the limited liability company’s management structure. For example, some LLC members will serve in active roles within the company, while others are silent partners.
These contracts also set out the rights and responsibilities of each member. You might have provisions that state each partner’s ownership percentages, voting rights, and ownership duties. The agreement can also allocate the business’ profits and losses or set the parameters for company meetings.
Ultimately, it is up to you and the other members of your business to ensure that the operating agreement meets the company’s basic needs. Given the importance of an operating agreement to your business’s future, meeting with an Alpharetta attorney would be in your best interest.
An operating agreement is an integral part of any functioning LLC. With a proper contract in place, you and the other members can avoid misunderstandings and disputes over an array of topics. In some cases, a well-drafted operating agreement can reduce the need for litigation between members.
One of the main advantages of using an LLC structure is that members typically do not face personal liability for claims against the company. If a creditor seeks a judgment against the company, they may not also pursue the individual members’ personal assets.
However, there is an important exception that can allow a creditor to reach the members’ private assets. This is through a legal theory known as “piercing the corporate veil.” If the creditor can show that the business exists entirely to avoid liability, they could pierce the veil and pursue the private assets of an individual member.
A valid operating agreement can serve as critical evidence that your company is truly an independent business and not simply a structure designed to avoid civil liability. If you plan on starting a company, you should speak with a knowledgeable lawyer about the many benefits of executing an operating agreement.
Before you start a limited liability company, it is best to detail each members’ rights and responsibilities in a written contract. This agreement will help protect members from liability and mitigate the need for litigation between partners. However, any errors or mistakes within the document could be detrimental to the future of your business.
An Alpharetta operating agreements lawyer advise you on how to create a contract that best serves you. Call Sparks Law right away to schedule your initial consultation with a legal professional.